ii view: Mondi profits hurt by rising energy costs

Credit: Mondi.

First-quarter trading update to 31 March

• Adjusted profit (EBITDA) excluding forestry operations of €204 million, down from €213 million in Q4

Chief executive Andrew King said: “Despite the uncertain outlook, we continue to focus on what we can control — driving operational excellence, rigorous cost and margin discipline, optimising our production footprint and focused cash-flow management. 

“These actions underpin our confidence in our ability to navigate the current headwinds and continue to deliver our high-quality range of sustainable packaging and paper products for our customers.”

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ii round-up:

Paper and packaging maker Mondi (LSE:MNDI) today detailed profits missing City forecasts, hindered by higher energy costs. 

Adjusted profits (EBITDA) for the first quarter excluding forestry operations of €204 million (£177 million) fell from €213 million in the prior fourth quarter. Analysts had forecast profits on that basis of €219 million. Product price rises now being implemented to compensate for increased costs are not expected to fully impact until the third quarter, leaving the current ongoing second quarter potentially hindered. 

Shares in the FTSE 100 company fell 8% in UK trading having come into this latest news down by close to a tenth so far in 2026. That’s similar to US-headquartered rival International Paper Co (LSE:IPC) and in contrast to a 4% gain for the FTSE 100 index year-to-date. 

Mondi operates across the two divisions of Flexible Packaging and Corrugated Packaging with its Uncoated Fine Paper business previously merged into the latter under a streamlining and efficiency drive. 

The company also flagged expectations for zero forestry-related profits over the full year, hurt by reduced wood prices and potentially down from existing analyst forecasts in the region of €30 million.

Mondi highlighted limited direct exposure to the now war-hit Middle East region. Recent actions under management’s ongoing performance improvement plan have included the closure of plants in Hungary, Poland and Germany.   

First-half results are scheduled for 30 July. 

ii view:

Mondi operates across the entire paper and packaging arena, from managing sustainable working forests to making recyclable and compostable packaging. Group products range from e-commerce shipping boxes to photocopy paper. The FTSE 100 company employs around 24,000 people across 100 production sites in more than 30 countries, with key operations across Europe, North America and Africa. 

For investors, a war in the Middle East and resulting increased energy costs are now impacting group costs. The tough economic outlook for group customers, including US trade tariff uncertainties, are not to be ignored. An industry oversupply, as previously highlighted by management, warrants consideration, while currency moves can hinder performance. 

To the upside, a management focus on improving efficiency is ongoing. Diversity of both products produced, and countries sold to, exists. Industry-wide consolidation has included the previous takeover of former rival DS Smith, while Mondi’s own previous bolt-on acquisitions have generated growth and cost-saving opportunities.

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For now, elevated energy costs suggest increased caution. That said, an estimated future dividend yield of around 2.5% and ongoing exposure to environmental sustainability and e-commerce themes are likely to keep investors interested. 

Positives: 

• Exposure to e-commerce and sustainability trends
• Ongoing performance improvement programme

Negatives:

• Uncertain economic outlook
• Exposure to currency movements

The average rating of stock market analysts:

Strong hold